U.S. sets (low) initial tariffs on Chinese solar panels

The first big decision for a trade complaint against Chinese solar manufacturers is in: the U.S. government announced a preliminary decision Tuesday to impose tariffs on silicon solar cells and panels from China as a way to offset the unfair subsidies the manufacturers have received from the Chinese government.

The preliminary decision came in response to a complaint filed by seven manufactures last October that contends that Chinese silicon solar companies had received unfair government subsidies that allowed them to sell products at far lower prices than their rivals could from other countries. The tariffs, also called countervailing duties, are meant to offset unfair subsidies in order to even the playing field.

The tariffs announced Tuesday are low. Suntech Power will pay a 2.9 percent tariff, Trina Solar will get 4.73 percent and the rest will have to contend with 3.59 percent. That means, for example, if Suntech ships solar panels at $100 each into the U.S., then it will pay $2.90 for each panel. The tariffs will apply to Chinese silicon solar cells and any panels containing Chinese silicon solar cells (the tariffs do not apply to Chinese solar panels that do not contain silicon solar cells that also are made in China).

The commerce department has focused its investigation on Suntech and Trina because the two companies are among the top solar cell and panel producers in the world and deemed representative of the Chinese solar manufacturing sector. The third tariff that applies to everyone is a weighted average from Suntech and Trina’s tariffs, said Tim Brightbill, the lead attorney for the petitioners, who are led by

American solar

SolarWorld. SolarWorld and the six companies who filed the complaint formed the Coalition for American Solar Manufacturing and lined up its own support from among the solar industry.

“It demonstrates that the commerce department didn’t find the Chinese government to be engaging in massive subsidies,” said Jigar Shah, president of the Coalition for Affordable Solar Energy, which was formed last November to oppose the trade complaint and counted a long list of manufacturers, distributors and installers as its members.

Although the decision is only preliminary, the U.S. Customs will collect money while commerce continues with its investigation to reach a final decision. If it decides against tariffs at the end, then the money will be returned. The tariffs are retroactive and cover imports from late December.

SolarWorld and other petitioners said the tariffs are in line with decisions by the commerce department in other cases involving Chinese goods.

“Today’s announcement affirms what U.S. manufacturers have long known: Chinese manufacturers have received unfair and WTO-illegal subsidies,” said Steve Ostrenga, CEO of Helios Solar Works, a Wisconsin solar panel maker and one of the petitioners, in a statement. “We appreciate the Commerce Department’s hard work in bringing these subsidies to light, and we look forward to addressing all of China’s unfair trade practices in the solar industry.”

The complaint reflects a deep resentment toward Chinese companies when the global solar market deteriorated. China is the biggest exporter of solar cells and panels into the U.S. Chinese companies have expanded production by gigawatts in recent years to take advantage of a growing demand for solar energy around the world.

At the same time, the massive production also contributed to a glut of solar panels that led to a drop of more than 50-percent in prices during 2011. The price collapse has cause big financial losses not just for Chinese companies but also manufactures from other countries as well, and it’s led to big layoffs, factory closures and bankruptcies. Impact has been felt by both large players and startups, including the now defunct Solyndra.

Suntech’s tech

The trade complaint has deeply divided the solar industry. On one hand the petition calls for creating a fair marketplace by following U.S. and international laws. On the other hand, the rulings outcome could lead to an increase in solar panel prices and that goes against the industry’s goal of reducing solar energy costs so that it’s more expensive than power from coal or natural gas power plants (and it could reduce profits for developers, too). Some U.S. manufacturers also worry that the complaint will invite retaliation from the Chinese government, which already has vowed to investigate whether the U.S. government has unfairly subsidized its silicon producers. The U.S. sells a lot of silicon and solar factory equipment to China.

Commerce isn’t only looking at the unfair subsidy allegations. The complaint also includes a claim that Chinese companies have flooded the market with cells and panels at prices that are less than the production cost or less than what they sell at home, Brightbill said. SolarWorld and other petitioners are asking the commerce department to impose anti-dumping duties, which would reflect the below-market value of imported Chinese solar products. Anti-dumping duties tend to be higher than countervailing duties.

For the anti-dumping investigation, the commerce department is looking at whether Chinese companies are selling their products at anywhere from 50 percent to 250 percent below the fair market value.

The commerce department is set to issue a preliminary decision on the anti-dumping claim in May. Its preliminary decisions won’t become final unless another agency, the U.S. International Trade Commission, determines that the U.S. solar industry has been harmed from unfair subsidies and anti-dumping practices. The commission already issued a preliminary decision that said harm had occurred. If the commission at the end says there is no harm, then neither tariff will be imposed.